REFERENCE: Ref.03_13 Fesler Inc.acquired All of the Outstanding Common Stock of Pickett

question 41

Essay

REFERENCE: Ref.03_13
Fesler Inc.acquired all of the outstanding common stock of Pickett Company on January 1,2009.Annual amortization of $22,000 resulted from this transaction.On the date of the takeover,Fesler reported retained earnings of $520,000 while Pickett reported a $240,000 balance.Fesler reported net income of $100,000 in 2009 and $68,000 in 20010,and paid dividends of $25,000 in dividends each year.Pickett reported net income of $24,000 in 2009 and $36,000 in 2010,and paid dividends of $10,000 in dividends each year.
Assume that Fesler's reported net income includes Equity in Subsidiary Income.
-If the parent's net income reflected use of the equity method,what were the consolidated retained earnings on December 31,2010?

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Definitions:

Leverage Operations

Financial strategies involving the use of borrowed money to increase the potential return of an investment.

Outstanding Stock

Refers to the total shares of a company that are currently owned by investors, including those held by institutional investors and company officials.

Earnings Per Share

The profit of a company divided by its total number of common stock shares outstanding, showing how profitable the company is.